Inflation is rising, wages are stagnating, and Tennesseans are being forced to pay more for less. Yet, at a time when most are focused on raising their salaries, lawmakers are pushing legislation that would only hurt those looking to save money.
The American Innovation and Choice Online Act, a bill backed by leading Democrats, would make previously affordable services more expensive, exacerbating the financial strain on consumers and pressuring online retailers to end their affordable store brands. On top of that, the bill will likely increase the costs of operating major online marketplaces – costs that could be passed on to the customer.
What would passing the AICOA look like for the average Tennessian? Recent reports have revealed that Amazon is discussing dropping its Amazon Basics label due to regulatory and legislative review – and that’s something the AICOA would ensure happens. The AICOA would ban what is called “self-preference”, preventing Amazon from promoting Amazon Basics products over others. The bill ignores how popular or affordable Amazon Basics products are compared to similar products and therefore also ignores what consumers want.
Ending services like Amazon Basics would deprive customers of a cost-effective and convenient option to choose from, just when they need it most. Buyers, not regulators, should decide what types of products they want to order. In fact, more than ever, customers are buying private labels, not just from “big-tech” companies, but from most major retailers that have private labels. Since the start of the COVID-19 pandemic, more than 41% of customers are buying more private label products, such as Costco’s Kirkland brand.
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AICOA supporters claim that Amazon having its own private label puts other sellers on the platform at a disadvantage. But Amazon’s private label sales represent a single-digit percentage of its overall sales. Nor does Amazon aggressively promote its own private label while hiding other sellers from search results, as competition advocates claim.
The reality is that Amazon Basics products succeed for the same reason store brands Publix and Kroger do – they give customers an affordable, reliable option when branded products are too expensive. They are often the cheapest choice. The ultimate impact of the AICOA would be to eliminate low-cost choice for consumers in the name of “competition”.
With wages stagnating and the cost of living rising across the country, clients are taking a hard look at their budget and what they can afford. This is especially true in Tennessee, where a combination of one of the highest sales tax rates in the nation and lower wages means the impacts of inflation hit harder than in most states.
AICOA will also increase the cost of many online products by increasing shipping and operating costs, due to new restrictions that businesses may have to pass on to consumers. The same section of AIOCA that prohibits the promotion of a company’s own product also prohibits the promotion of a company’s own service.
Because Amazon Prime is Amazon’s “own service,” the bill would ban Prime’s free two-day delivery. It would also prohibit Amazon from promoting third-party sellers who participate in the Fulfillment by Amazon program, where merchants pay a fee to participate, hurting small businesses that partner with Amazon.
While proponents of AICOA claim it will reduce costs for consumers, we are already seeing that its effects will likely cause the opposite. Forcing the shutdown of popular private label ranges will drive prices up at the worst possible time.
Tennessees don’t need more pressure on their wallets right now. Targeting private labels that are popular with consumers, as the AICOA would, is out of step with sentiment, not just in Tennessee, but nationwide.
Adam Kovacevich is the founder of a center-left tech industry coalition called the Chamber of Progress and has worked at the intersection of technology and politics for 20 years, leading public policy at Google and Lime, and serving as Democratic Hill’s aide.
